American College of Physicians: Internal Medicine — Doctors for Adults ®

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What capitation really means

From the February 1996 ACP Observer, copyright 1996 by the American College of Physicians.

  • Capitation: A way of reimbursing physicians that transfers the financial risk of care to the physicians and away from the health plan or the patients. Capitation also refers to the per capita payment for providing specific health services to a defined population over a set period of time. Typically, the provider receives in advance a negotiated monthly payment from the HMO, usually referred to in terms of a "per-member-per-month" (pmpm) payment. This payment stays the same no matter how much service the physician or group actually provides.
  • Professional services cap: A capitation payment, usually to a large multispecialty group or integrated delivery system, for total professional services. That includes all doctor charges, whether incurred in an office or a hospital, or whether the doctor works for the group or has been contracted with to provide care. Generally, professional services caps run about $35 to $40 pmpm across the country for commercially-insured (as opposed to Medicare or Medicaid) populations, said David Gans of the Medical Group Management Association (MGMA).
  • Primary care cap: Groups of internists, family physicians, pediatricians and sometimes ob/gyns, are paid on a pmpm basis to provide a negotiated list of primary care services to a panel of patients. The best primary care cap contracts list the services covered by the capitation payment specifically by CPT code, for example. Other services are then reimbursed on a fee-for-service basis. For commercially insured populations, primary care caps nationwide can average between $10 and $14 pmpm, according to consultants.
  • Specialty capitation: A single-specialty group can be selected by a health plan to care for all the plan's members for a specified set of specialty services for a set pmpm payment. The most common specialty caps today are for cardiology, orthopedics, radiology and ophthalmology. For example, a cardiology group might be paid 80 cents pmpm to care for an entire health plan's patients cardiology needs, with certain expensive procedures carved out to be paid fee-for-service.

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